Forex regulator warns potential risks still exist despite negative flow of 'hot money' last year
China's foreign exchange regulator has warned of the potential risks of increased capital inflows in 2013, despite annual calculations showing that the flow of "hot money" turned negative last year.
There have been ongoing fears that China may face a rebound in capital inflows this year, partly due to the ongoing loosening in monetary policies by developed countries as well as growing interest in the Chinese economy from foreign investors.
In a cross-border capital flow report released on Thursday, the State Administration of Foreign Exchange said China still faces a possible rebound in money inflows and possible fluctuation in both directions.
"Emerging economies are subject to capital inflow pressures and currency appreciation, due to the excessive easing in monetary policies adopted by major economies," said the report.
It warned such easing should not be seen as a panacea, and that it has triggered rising uncertainties around the globe.
"Emerging economies must be aware that once the risks start to accumulate again, they will face growing capital outflow pressure and currency devaluation."
The report vowed that SAFE will strengthen its monitoring of cross-border capital flows, and was ready to act against any fluctuations, especially massive inflows.
Its remarks came after Federal Reserve Chairman Ben Bernanke suggested on Tuesday that further monetary easing was on the way for the US, saying the Fed's initiative in bond purchases is creating a stronger recovery at home and "mutually beneficial" results for other countries.
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